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Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets

  • Lars E O Svensson

The paper discusses the implementation of inflation-targeting across countries. It argues that the intermediate variable under an inflation target is, in effect, the inflation forecast. Such a regime is shown to confer benefits over other regimes, such as money and exchange rate targeting: in terms of the efficient implementation of policy; in terms of transparency; and in terms of the stabilisation of inflation and output.

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File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/1996/wp56.pdf
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Paper provided by Bank of England in its series Bank of England working papers with number 56.

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Date of creation: Nov 1996
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Handle: RePEc:boe:boeewp:56
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  1. John B. Taylor, 1996. "Policy Rules as a Means to a More Effective Monetary Policy," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 14(1), pages 28-39, July.
  2. Stephen G. Cecchetti, 1995. "Inflation Indicators and Inflation Policy," NBER Working Papers 5161, National Bureau of Economic Research, Inc.
  3. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
  4. Peter B. Clark & Douglas Laxton & David Rose, 1995. "Capacity Constraints, Inflation and the Transmission Mechanism; Forward-Looking Versus Myopic Policy Rules," IMF Working Papers 95/75, International Monetary Fund.
  5. Stanley Fischer, 1996. "Why are central banks pursuing long-run price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 7-34.
  6. A. W. Coats, 1995. "Comment," History of Political Economy, Duke University Press, vol. 27(5), pages 157-161, Supplemen.
  7. Svensson, Lars E.O., 1997. "Price Level Targeting vs. Inflation Targeting: A Free Lunch?," Seminar Papers 614, Stockholm University, Institute for International Economic Studies.
  8. Quah, Danny, 1995. "Measuring Core Inflation," CEPR Discussion Papers 1153, C.E.P.R. Discussion Papers.
  9. Francis Breedon & Ian Twinn, 1995. "Valuation of underwriting agreements for UK rights issues: evidence from the traded option market," Bank of England working papers 39, Bank of England.
  10. Goodfriend, Marvin, 1986. "Monetary mystique: Secrecy and central banking," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 63-92, January.
  11. Cukierman Alex, 1992. "Central Bank Strategy, Credibility, And Independance: Theory And Evidence," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 3(4), pages 10, December.
  12. Mervyn King, 1996. "How should central banks reduce inflation? - Conceptual issues," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 25-52.
  13. Söderlind, Paul & Svensson, Lars E.O., 1997. "New Techniques to Extract Market Expectations from Financial Instruments," Seminar Papers 621, Stockholm University, Institute for International Economic Studies.
  14. Hall, R.E. & Mankiw, N.G., 1993. "Nominal Income Targeting," Harvard Institute of Economic Research Working Papers 1650, Harvard - Institute of Economic Research.
  15. Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, vol. 54(5), pages 1099-1128, September.
  16. Persson, Torsten & Tabellini, Guido, 1996. "Monetary Cohabitation in Europe," CEPR Discussion Papers 1380, C.E.P.R. Discussion Papers.
  17. Mervyn King, 1994. "Monetary policy in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 15(3), pages 109-28, August.
  18. Guy Debelle & Glenn Stevens, 1995. "Monetary Policy Goals for Inflation in Australia," RBA Research Discussion Papers rdp9503, Reserve Bank of Australia.
  19. Glenn Rudebusch, 1996. "Is opportunistic monetary policy credible?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue oct4.
  20. Clarida, R. & Gertler, M., 1996. "How the Bundesbank Conducts Monetary Policy," Working Papers 96-14, C.V. Starr Center for Applied Economics, New York University.
  21. von Hagen, J, 1995. "Inflation and Monetary Targeting in Germany," Papers 03, American Institute for Contemporary German Studies-.
  22. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
  23. Mervyn King, 1996. "How should central banks reduce inflation? conceptual issues," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 53-91.
  24. Friedman, Benjamin M., 1990. "Targets and instruments of monetary policy," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 22, pages 1185-1230 Elsevier.
  25. Michael Woodford, 1994. "Nonstandard Indicators for Monetary Policy: Can Their Usefulness Be Judged from Forecasting Regressions?," NBER Chapters, in: Monetary Policy, pages 95-115 National Bureau of Economic Research, Inc.
  26. Danny Quah & Danny Quah & Shaun P. Vahey, 1995. "Measuring Core Inflation," CEP Discussion Papers dp0254, Centre for Economic Performance, LSE.
  27. Ammer, John & Freeman, Richard T., 1995. "Inflation targeting in the 1990s: The experiences of New Zealand, Canada, and the United Kingdom," Journal of Economics and Business, Elsevier, vol. 47(2), pages 165-192, May.
  28. Persson, Torsten & Tabellini, Guido, 1993. "Designing institutions for monetary stability," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 53-84, December.
  29. D. E. Moggridge, 1995. "Comment," History of Political Economy, Duke University Press, vol. 27(5), pages 87-91, Supplemen.
  30. Nicola Anderson & Francis Breedon, 1996. "UK Asset Price Volatility Over the Last 50 Years," Bank of England working papers 51, Bank of England.
  31. John B. Taylor, 1996. "How should monetary policy respond to shocks while maintaining long-run price stability? Conceptual issues," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 181-195.
  32. Athanasios Orphanides & David W. Wilcox, 1996. "The opportunistic approach to disinflation," Finance and Economics Discussion Series 96-24, Board of Governors of the Federal Reserve System (U.S.).
  33. Clive Briault & Andrew Haldane & Mervyn King, 1996. "Independence and Accountability," Bank of England working papers 49, Bank of England.
  34. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
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